SCOTUS Faces $2 Billion Separation of Powers Question

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By Nicholas Datlowe

Jan. 13 — Does it violate separation of powers for Congress to pass a statute that appears to command a particular result in a case over nearly $2 billion sought to satisfy judgments against Iran? The question's deep implications for the federal government were on display during oral argument at the U.S. Supreme Court Jan. 13.

The heated arguments inside the courtroom were a stark contrast with the brisk weather outside it. Justices pressed hard for a principle that could distinguish when Congress had crossed the line from legislating to resolving a specific case, but appeared dissatisfied with each side's answers.

Specific Statute, Specific Case

The issue arises out of a fight over nearly $2 billion in bond proceeds and interest that terrorism victims and their families and estates seek to access in order to satisfy default judgments against Iran.

The plaintiffs argued that the Bank Markazi—the central bank of Iran—was the holder of the beneficial interest in the funds, and sought to attach them.

While that litigation was ongoing, Congress passed 22 U.S.C. §8772. The statute allows “the financial assets that are identified in and the subject of proceedings in the United States District Court for the Southern District of New York in Peterson et al. v. Islamic Republic of Iran et al., Case No. 10 Civ. 4518 (BSJ) (GWG)”—the case below—to be attached to satisfy the judgments.

Skepticism All Around

Jeffrey A. Lamken of MoloLamken LLP, Washington, arguing for Bank Markazi, seemed to have difficulty articulating when very specific legislation would implicate the balance of powers.

“I don't really understand the limiting principle of your argument,” Justice Samuel A. Alito Jr. said. “You've said that the number of cases is not determinative,” that “the naming of the cases isn't significant and that it might not even be significant whether the case has been filed yet.”

Lamken tried to avoid the issue, responding, “the court could rule simply that when Congress singles out one case and one case only,” as it did here, “that crosses the line.”

But Theodore B. Olson of Gibson, Dunn & Crutcher LLP, Washington, arguing for plaintiffs seeking to attach assets of the bank to satisfy default judgments, ran into similar skepticism with his argument that Congress could change the rule of decision in any case that wasn't yet final, as long as it didn't specifically direct the result as between the two parties.

Chief Justice John G. Roberts Jr. pointed to places where courts, at the direction of the “strong man who runs the country,” decide a case a certain way.

“I'm not sure I see what the difference is here,” he said.

Acting by Generality

Lamken ran into difficulty with his argument right off the bat, challenged by Justices Ruth Bader Ginsburg and Elena Kagan on whether the statute really affected only one case and, if it did, whether that mattered.

Alito also wondered if the specification of the case in the statute mattered, noting that a “creative drafter” could limit a statute to only capture exactly those cases Congress intended without naming them specifically.

Lamken argued that separation of powers was violated “when Congress is not willing to make the law applicable generally to categories of cases but singles out particular pending cases.”

Justice Antonin Scalia didn't seem convinced. “Where do you get the notion that Congress can only act by generality? It acts all the time on individual matters.”

“Congress cannot limit its legislation to one and only one case such that it dictates the outcome” so that “there's only one conceivable result,” Lamken responded.

“Why is that?” Scalia wondered.

Deference vs. Judgment

But Deputy Solicitor General Edwin S. Kneedler, arguing as amicus on behalf of the plaintiffs, and Olson faced equally tough questioning about their more expansive interpretation of Congressional power.

Justice Anthony M. Kennedy posed a hypothetical where there were two identical pending suits, but Congress repealed the statute of limitations as to only one of them. “In your view, they can do that?”

“Yes,” Olson replied, citing to United States v. Schooner Peggy, 5 U.S. (1 Cranch) 103 (1801). To the extent that might violate individual rights, the Constitution contained other provisions, including the ex post facto and bill of attainder clauses, to deal with them, he said.

Roberts challenged this interpretation. What if Congress passed a law saying, “in any case involving a challenge to the statutory interpretation of the Secretary of HHS to” a hypothetical Health Care Act, “once it finds jurisdiction, the court will enter judgment agreeing with the Secretary?”

“I believe it's okay, under the circumstances, because” Congress “is changing the underlying substantive law,” without directing the result as between two specific parties, Olson replied.

“I think that's a little surprising,” Roberts said.

“Some might say that Congress does that all the time, by providing authority in administrative officials to interpret the statute,” and those interpretations then get deference, Olson said.

“There's a difference between affording deference and entering a judgment,” Roberts said.

‘Congress Has to Be Cute About It.'

Kneedler argued that the critical distinction between permissible and impermissible Congressional action was whether it had actually changed a law.

“Suppose they've changed the law for this particular case?” Kennedy asked.

“It's still an amendment of the law” and therefore permissible, Kneedler responded.

“Well, I find that a very odd distinction,” Kennedy replied.

“You're saying Congress has to be cute about it,” Roberts added. “It becomes a problem” because “when there is a case, Article III says that's our job. Their job is to pass laws; our job is to decide a case,” he said.

“If you want to be cute, Congress has 4,000 ways of being cute. And I can't quite see this court trying to police those ways,” Justice Stephen G. Breyer interjected.

Power and Accountability

Two of Lamken's primary arguments met with varying levels of success.

He noted that several state courts had held, around the time of the nation's founding, that laws with that kind of specificity were unconstitutional.

Kneedler responded that although several states had held that under their state constitutions, “the federal constitution as a matter of separation of powers, has no limitation on special laws.”

Lamken also argued Congress had never before passed a law with this kind of specificity, and “that kind of reticence would be amazing if it were not for the fact that Congress understood that that was constitutionally prohibited.”

“That's what troubled me about the case,” Scalia said. Alito suggested that maybe Congress just thought such legislation would be “unfair.”

Olson responded that Congress passes particularized legislation favoring specific individuals all the time, and that “it can't be a constitutional principle that if you put a case name in the change of the law, all of a sudden it becomes unconstitutional.”

International Angle

“Why doesn't it make a difference that this is in the area of foreign affairs?” Kagan asked, noting that the political branches have “a great deal of power in this area.”

Lamken argued that part of that power derives from the courts' unwillingness to “embarrass the executive or create an international incident.”

But the operation of state law—which underlie the attachment case before the enactment of Section 8772—doesn't implicate those concerns, he said.

“State law is what would apply, perhaps, in the absence of a Congressional statute,” Breyer responded. Why would it be wrong for Congress and the president to step in and determine which assets of a foreign state should be attachable to satisfy a judgment?

“That would exacerbate the separation of powers problem because the executive branch and the political branches should take accountability for seizing the assets, confiscating them, distributing them. But they cannot, cannot attempt to give it an air of judicial legitimacy,” Lamken said.

Kneedler also emphasized the foreign affairs angle, noting that presidential suggestions of sovereign immunity are case-specific and can require dismissal of particular cases.

Here, however, Congress “changed the law of sovereign immunity by removing a possible defense that central bank funds were not subject to attachment.”

‘Don't Hire a Lawyer.'

“What Congress did in Section 8772 is act pursuant to its core constitutional authority by legislating change in substantive laws,” Olson argued.

Kneedler agreed, saying that Congress has historically legislated with respect to specific disputes—noting specifically railroad labor disputes—by passing specific laws. Those laws “can't be rendered unconstitutional just because there happens to be a suit pending about it,” he said.

But a “law which says, in this one case, here is going to be the result is entirely foreign to our legal tradition,” Lamken responded.

“The lesson it teaches the populace is: If you want to win your case in court, don't hire a lawyer; hire a lobbyist.”

To contact the reporter on this story: Nicholas Datlowe in Washington at

To contact the editor responsible for this story: Jessie Kokrda Kamens at

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